(Reuters) - India's GVK Power & Infrastructure <GVKP.NS> will pay $1.26 billion for a majority stake in three Australian coal mines and a port and rail project owned by Hancock Group to secure long-term coal supplies for the Indian group's power projects.
The Indian infrastructure group will acquire a 79 percent stake in the Alpha and Alpha West coal mines in the Galilee Basin, and will buy Kevin's Corner coal mine and the rail and port project connecting the coal mines outright, it said in a statement late on Friday.
"At full production the three coal projects are together expected to supply about 84 million tons per annum to the global sea-borne coal market," GVK said in a statement adding most of the coal from the projects was meant for Asian markets.
The deal ends months of talks, which began in February and have been extended through the year.
GVK will pay $500 million initially to Hancock, $200 million after one year, and the remainder on financial close of the project, which is expected to be 2012, it said adding the deal would be funded by bank loans.
The first phase of production, scheduled to start in 2014, is expected bring in more than 30 million tons per year of thermal coal, it said.
Indian energy firms have been scouting for overseas coal assets, typically in Australia, Indonesia and Africa, to feed power plants at home.
India holds 10 percent of the world's coal reserves, but local supplies are falling short as the country builds more power plants and as domestic coal projects run into environmental and land acquisition delays.
Last year India's Lanco Infratech <LAIN.NS> bought coal mines from Australia's Griffin Coal <GRIFN.UL> for an undisclosed sum, while Adani Enterprises <ADEL.NS> agreed to buy Galilee coal project from Australia's Linc Energy <LNC.AX> for $2.7 billion.
In May this year, Adani unit Mundra Port and Special Economic Zone <MPSE.NS> agreed to buy Abbot Point Coal Terminal in Australia for $2 billion in an all-cash deal to tap into growing coal traffic in overseas markets.
(Reporting by Morag MacKinnon in Sydney; additional reporting by Kaustubh Kulkarni in Mumbai; Editing by Daniel Magnowski)